When you generate more power than you use, a net meter will allow you to sell that excess power you have produced back to the utility. What follows is an explanation of net metering and how you can benefit from it. So what exactly is net metering?

In the context of how the typical household uses electricity, the AC current flows from the power plant, along the electrical grid and to the final point of use – your home. The electric meter mounted on your home measures this flow of electricity into your home and, at the end of each month, you receive a bill from your electric provider for each kilowatt-hour used. In this type of setup, the flow of electricity is uni-directional, meaning it only flows from the grid to your home.

In a net-metering arrangement, the flow of electricity is bi-directional. The DC current which is generated by your solar panels flows into an inverter, where it’s converted into usable AC current. Any of the AC power that you do not use then flows back into the grid, at which time the meter will spin backward. This electricity which flows back into the grid is sometimes referred to as net excess generation, or NEG. Many states require utilities to purchase any NEG from you, usually at the going retail rate for electricity. In this way, solar panels derive value by enabling you to offset your monthly utility charges.

Net metering is a low-cost, easily administered method of encouraging customer investment in renewable energy technologies. It increases the value of the electricity produced by renewable generation and allows customers to “bank” their energy and use it a different time than it is produced, giving customers more flexibility and allowing them to maximize the value of their production. Providers may also benefit from net metering because when customers are producing electricity during peak periods, the system load factor is improved.

As of November, 2010, net metering was offered in 43 states, Washington, D.C., and Puerto Rico (see map of state net metering rules from DSIRE). For a more detailed description of state net metering policies and links to the authorizing legislation, see the DSIRE database, which is a project of the Interstate Renewable Energy Council funded by the U.S. DOE and managed by the North Carolina Solar Center.

To get started, contact your electric provider to see if they offer net metering. A number of state governments have taken steps to require investor owned utilities (IOUs) to provide net metering to their customers. For those living in Canada, here is a handy little guide we found that shows where net metering is available.